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Difficulty: EasyFactors of Production and Their Rewards

Which factor of production is responsible for combining all other productive resources to organize business operations and receives profit as its reward?

  1. A
    Land
  2. B
    Labour
  3. EnterpriseAnswer
  4. D
    Capital

Answer

Enterprise
Enterprise is the organizing unit in production. The entrepreneur takes financial risks, makes strategic business decisions, and combines land, labour, and capital. For performing these functions, the economic reward received is profit.

Step-by-Step Solution

1
Identify the four basic factors of production and their respective economic rewards
Land earns rent, Labour earns wages/salaries, Capital earns interest, and Enterprise earns profit.
Each factor of production receives a specific reward for its contribution to the production process.
2
Match the risk-bearing and organizational function to the correct factor
Enterprise is the decision-making and risk-bearing factor that coordinates land, labour, and capital.
The entrepreneur assumes business risks and receives profit as the residual reward for successful management and risk-taking.

Key Concept

Factors of Production and Their Rewards
Estimated Time:45s
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Topics

Factors of Production and Their Rewards

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